As we move further into 2025, interest rates in South Africa are top of mind for many. The South African Reserve Bank (SARB) has already made a series of decisions this year to adjust rates, but what’s next? Will there be more cuts, or will the rates rise again? This article explores the current outlook, the factors driving these decisions, and what it means for consumers and businesses.
Current Interest Rate Overview
As of August 2025, the SARB’s repo rate stands at 7.00%, down from 7.25%. This drop is part of the SARB’s ongoing efforts to support economic recovery while controlling inflation. With inflation at around 3.2%, well within the target range of 3% to 6%, the SARB has room to reduce rates without sparking inflation.
What Does This Mean for Borrowers and Savers?
The recent rate cut makes borrowing cheaper. If you have a mortgage or business loan, you’re likely seeing lower monthly repayments. The prime lending rate has dropped to 10.50%, making credit more affordable for homeowners, businesses, and anyone looking to borrow money.
However, this also means that if you’re saving, you may see lower returns. Savings accounts and fixed deposits generally offer reduced yields in a low-rate environment, making it harder to grow your savings as you did in previous years.
ALSO READ: What SA’s New 3% Inflation Target Means for Markets and the Country’s Debt Crisis
Key Factors Shaping South Africa’s Interest Rate Outlook
Several key factors, both local and global, influence the SARB’s decisions about interest rates. Let’s break down what’s driving these changes.
Global Economic Conditions
South Africa’s interest rates are influenced by economic trends worldwide. For example, tensions in global trade, like potential U.S. tariffs on South African exports, could hurt the local economy. If global conditions worsen, the SARB might be forced to adjust rates to manage inflation and protect the economy.
The U.S. Federal Reserve’s actions also play a role. If the Fed continues to raise its rates, it could lead to a stronger dollar, putting pressure on the rand. The SARB would need to act to protect the local currency, which could lead to higher interest rates.
Domestic Economic Pressures
On the local front, South Africa faces significant challenges. The country’s GDP growth forecast for 2025 has been revised down to 1.2%, from an earlier estimate of 1.7%. This slowdown stems from factors like high unemployment, power shortages, and fiscal constraints. These issues make it difficult for the economy to recover quickly, and the SARB may continue to reduce rates gradually to support growth.
However, the SARB must also remain cautious. Cutting rates too much could result in inflation. So, while rate cuts are likely, the bank will proceed carefully, balancing the need for growth with inflation control.
Expert Predictions: What’s Next for Interest Rates?
So, what do experts expect for interest rates in the second half of 2025? Here’s what some economists are predicting.
Will the SARB Cut Rates Further?
Annabel Bishop, Chief Economist at Investec, believes the SARB will continue to reduce rates if inflation remains under control and economic growth stays weak. She predicts that the SARB could make one or two more rate cuts, depending on how the economy responds.
Maarten Ackerman, Chief Economist at Citadel, takes a more cautious view. He thinks the SARB will keep rates steady unless there are significant changes in either the global or local economic environment. Ackerman expects the bank to take a careful, measured approach to avoid making any drastic moves.
The Inflation Target Debate
Another point of discussion is whether the SARB will adjust its inflation target. Some experts are suggesting that the SARB might lower its target to 3% to align with global practices. However, this change has not yet been officially approved by the National Treasury. If the target changes, it could signal more rate cuts, but the timing will depend on how inflation behaves in the coming months.
How Rate Changes Affect Consumers and Businesses
Changes in interest rates impact not just your borrowing costs but the broader economy as well. Here’s a look at how interest rate decisions can affect various aspects of your financial life.
Impact on Borrowing Costs
For consumers and businesses, lower interest rates mean cheaper loans. If you’ve been putting off a home purchase or business investment due to high borrowing costs, this is a good time to reconsider. The prime lending rate of 10.50% makes borrowing more affordable, and further cuts could lower that number even more.
On the flip side, savers should be prepared for reduced returns. Fixed deposits and other savings products often offer lower returns when interest rates fall. This could make it more challenging to grow your savings in a low-rate environment.
Impact on Investments
Cheaper credit could encourage more businesses to borrow and invest in new projects, which may help stimulate economic growth. With lower borrowing costs, businesses can expand, buy equipment, or invest in infrastructure projects. This could positively affect the economy in the long run.
However, lower rates also mean that investments like bonds or fixed deposits become less attractive. Investors may seek higher returns by moving into riskier assets, such as stocks or offshore investments. This shift could impact the investment landscape in South Africa.
What’s Next for Interest Rates in South Africa?
Looking ahead to the remainder of 2025, the SARB is likely to continue its cautious approach. The central bank will probably make small rate cuts if inflation remains low and the economy continues to struggle. The global economic situation will also play a significant role in the SARB’s decisions.
Key Insights:
- The SARB may continue to reduce interest rates slightly, but only if inflation stays under control.
- Borrowers will benefit from lower interest rates, making it easier to access credit.
- Savers may see lower returns on their savings and investment products.
READ MORE: Economists Predict Repo Rate Cut in September as Inflation Remains Low at 3%
Economic Outlook for the Rest of 2025
In short, the SARB will likely keep interest rates stable for the rest of 2025, with some small cuts possible depending on economic conditions. While the rates are expected to remain low, borrowers can take advantage of cheaper credit, but savers may need to adjust their expectations for returns. As always, staying informed about these changes will help you make the best financial decisions moving forward.